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Montreal aerospace cluster Attractors and dynamics Jorge Niosi Professor Department of Management and Technology UQAM and Majlinda Zhegu PhD candidate in Administrative Sciences Department of Management and Technology UQAM A presentation to the meeting Of the Innovation System Research Network May 9 and 10, 2002 Quebec City This is a preliminary version Not for reproduction or circulation

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Montreal aerospace clusterAttractors and dynamics

Jorge NiosiProfessor

Department of Management and TechnologyUQAM

and

Majlinda ZheguPhD candidate in Administrative Sciences

Department of Management and TechnologyUQAM

A presentation to the meetingOf the Innovation System Research Network

May 9 and 10, 2002Quebec City

This is a preliminary versionNot for reproduction or circulation

- Industrial districts : Marshall and Italian tradition

- Perroux industrial poles

- Regional Innovation Systems : Cooke and Morgan, de la Mothe, Niosi…

- Porter’s Clusters and related diamonds

Theories available

- Large dominant firms

- High barriers to entry

- Increasing returns and high upfront R&D costs

- World markets for products

- Inertia : large plants imply high sunk costs

- Attractors are large systems integrators, not universities, government laboratories or other institutions.

Characteristics of aerospace clusters and industry

Montreal Cluster

- 260 firms including two large systems integrators (Bell andBombardier) plus several intermediate product firms (engines, avionics, landing gear)

- Developed over 80 years

- An innovation cluster (business and regional jets,engines and avionics) coexists with a production cluster for helicopters

- Universities and government laboratories play a minor role up tonow.

Defining clusters and regional innovation systemsClusters

« A geographical cluster is here defined as a strong collection of related companies locatedin a relatively small geographical area. » (Beaudry & Breschi, 2000)

Porter, Michael (2001) : « Clusters are geograpical contrations of interconnected companies and institutions in a particular field. »Regional innovation systems

“Regions which possess the full panoply of innovation organizations set in an institutionalmilieu, where systemic linkage and interactive communication among the innovation actors is normal, approach the designation of regional innovation systems”(Cooke and Morgan, 1998)

Regional systems of innovation are sets of institutions (innovating firms, research universities, research funding agencies, venture capital firms and government laboratories and other appropriate public bodies) and the flows of knowledge, personnel, research monies, regulation and embodied technology that occur within a region (metropolitan area, sub-national unit or other). (Niosi, 2001)

Aircraft Biotechnology Software

Industry age 100 years 20 years 30 years

Industry structure Large firms dominate

SMEs dominate Large corporations and SMEs coexist

Clusters attractor Large assemblers Public policies for R&D, pool of human

capital

Public policies for R&D, pool of human capital

Cluster incubator None Research university Large private R&D labs

Cluster driver Successful familiesof aircraft

Successful human health products niche

Sucessful products in the telecom/e-business/internet niche

Typical number of firms in clusters

Over 100 (one or few assemblers, many suppliers)

Over 50 (many competing spin-off

firms)

Over 50 (many competing spin-off firms)

Other keyparticipants in clusters

None Research universities. Venture capital

Venture capital

Examples in theworld

Fort Worth, TxSeattle, Wa

TurinToulouse

San Francisco, San Diego, CA

Research Triangle Park, NC

Palo Alto, CARedwood Shores, CA

Redmond, WaCambridge, UK

Walldorf, Germany

Examples in Canada MontrealToronto

Toronto,Montreal, Vancouver

TorontoOttawa, Montreal, Vancouver

Theories useful Perroux poles Human capital and KSs

Human capital and KSs

Aircraft, biotechnology and software clusters compared

City Company Productdescription

Models Units sold(and firm orders)

From/up to

Montreal Bombardier ChallengerBusiness Jet

CL600; CL601CL600S; CL601-1ACL601-3ACL604

448(all models)

1978/mid-1999

Montreal Bombardier Fire-fighterAmphibian

CL-215TCL-415 51 1991/mid1999

Montreal Bombardier Regional jet RJ100RJ100ERRJLR; CRJ200CRJ700Global Express

600(all regionaljets)105(Global xpress)

1987/Mid-2000

Montreal Bell Helicopter

Civil helicopter

Bell 212; Bell 412; Bell 222Bell 230Bell 430 Bell 407Bell 427; Bell TR

20001985/March-2002

Toulouse Airbus Industrie

Medium to long range civil aircraft

A300; A310A319; A320A321; A330A340

3375 1972/Sept. 1999

Seattle Boeing Medium to long range civil aircraft

737; 747757; 767777

3082, 400872; 779429

Seattle Boeing Business jet BBJ 71 1996/March 2002

Successful products in growing clusters

Sources :

Notes. Models actually being produced only

Other aircraft clusters

City Company Productdescription

Models Units sold(and firm orders)

From/up to

Toronto Bombardier Regional aircraft

DHC-8 590 1987/mid-1999

Long BeachCA

Boeing Short to medium range civil aircraft

717 115 1991/mid1999

Employment in Ontario, Quebec and Canada’s aerospace industry, 1967-97 (five year averages and % of Canada’s total aerospace employment)

Years Ontario Quebec Canada

32282 (100%)1967-71 14214 (44%) 14909 (46%)

1972-76 10238 (44%) 9750 (42%) 23421 (100%)

1977-81 13041 (40%) 15614 (48%) 32573 (100%)

1982-86 13739 (41%) 16457 (50%) 33163 (100%)

1987-91 18119 (42%) 19118 (44%) 43580 (100%)

1992-96 12378 (32%) 20049 (51%) 39072 (100%)

1997 13838 (32%) 22310 (51%) 44085 (100%)

Source : Statistics Canada

Company Montreal Toronto Winnipeg Vancouver Halifax Ottawa Calgary

Company #1 69 25 7 3 0 0 0

Company #2 12 10 0 0 0 0 0

Company #3 6 3 0 NA NA NA 0

Company #4 0 2 NA NA NA NA NA

NRC labs NA NA NA NA NA 5 NA

Total patents 87 40 7 3 0 5 0

Patents in Canadian aircraft (1976-2000)

NA: Not applicable

Variable Montreal Toronto Winnipeg Vancouver Halifax Ottawa Calgary

Key firms 8 9 3 2 2 2 3

Employment 18595 11943 2300 1325 1160 1135 375

Employment(%)

50.4 32.4 6.2 3.6 3.1 3.1 1.1

Average number of employees per firm

2324 1327 766 663 580 568 135

Median number of employees per firm

1050 760 700 663 580 568 75

Average age of firms

69 45 43 19 21 44 28

Median age of firms

59 51 30 18 21 44 25

Other indicators, Canadian Aircraft, 2000

Figure 1. Aircraft & Aircraft Parts Establishments

0

50

100

150

200

250

19591963

19671971

19751979

19831987

19911995

Year

Est

ablis

hmen

ts

Quebec

Ontario

Canada

Figure 2: Aircraft & Aircraft Parts Employees

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

19591963

19671971

19751979

19831987

19911995

Year

Empl

oyee

s Quebec

Ontario

Canada

Figure 3: Montreal aerospace cluster

Personnel Personnel

Personnel $ $ $ $ $ > 120 suppliers > 60 suppliers >30 suppliers

>30 suppliers

Bombardier Aerospace

Bell Helicopter Textron

Honeywell Héroux-Devtek

P&WC

CIAR NRC

ETS-UQ

Univ. De Mtl.

Montreal Aircraft and Aircraft Parts Cluster Specialization

Bombardier BHTCanada

HoneywellCAE; CMC élec.Dassault

Héroux-DevtecThales

P&WC

260 suppliers260 suppliers

Figure 5: Aircraft and Aircraft Parts Establishments by the foundation Year

0

2

4

6

8

10

12

14

16

18

1903

1914

Prat

t&W

itney

Can

ada

1928 19

3719

4019

42

Bom

bard

ier 1

945

1949

1952

1954

1959

1961

1963

1966

1969

1972

1973

Cha

lleng

er 1

980

1976

1978

1980

1982

Bell

Helico

pter

Tex

tron

Cana

da 1

984

1986

CL60

0 (B

omba

rdie

r) 1

989

1990

CRJ R

egio

nal J

et (B

omba

rdier

)199

219

9419

9619

99

Num

ber o

f Esta

blish

men

ts

Conclusions

1. Aerospace clusters are neither Marshallian industrial districts nor Porterian clusters but Perrouvian industrial poles, dominated by large corporations

2. Montreal combines both an innovation and a production cluster.

3. The role of universities and government laboratories is secondary.

4. The dynamics of the industry depends on the continuous success of families of products in world, not local markets.

5. Inertia due to large sunk costs in major plants make that aerospace cluster are long-term phenomena.

6. Finally, specialization is the characteristic of most aerospace clusters, with Montreal one of the major exceptions to the trend